On the Record

Does the U.S. Economy Need More Stimulus?

As the U.S. economy continues to show weakness even after the passage of the $787 billion stimulus package in February, some experts are calling for another stimulus.  Senior Fellow Alice Rivlin says the government should do more but questions whether we need more spending outside the regular budget process; she also looks at General Motor’s emergence from bankruptcy and and discusses inflation fears.

Transcript

“The economy is not by any means back to normal. It has not stopped falling yet. In fact, we don’t know where the bottom is. Even if it stops falling in the sense that the GDP stops shrinking quite soon unemployment is going to continue to rise for a while. This is not new news. We knew that. We knew that this is a bad recession, and that unemployment always lags the turn around, so the government needs to do what it can to support the economy, however, I would not favor a special stimulus package now. By that I mean an emergency package outside the regular budget process. We need to continue spending the stimulus money that was already voted. We certainly need to invest in the future, in skills, and in science, and we need to help people who are most injured by the recession. But that ought to be done through the regular budget process and it ought to be paid for. It should not add to the long-term deficit. Pulling it out of the budget process and saying ‘we are going to have a quick stimulus, which is an invitation to pork barrel spending, and we don’t have to pay for it because its stimulus” all of that I think is ill advised. We have a budget process. We should use it to set priorities, and to make sure that we are not adding to the long-term deficit. In fact, we need to bring the long-term deficit down. “

“…One can only wish GM well. We all hope that it comes back as a smaller more efficient company this is a bad moment to be launching a new venture, and this is a new venture, because nobody is buying cars, but over the long run one can hope the taxpayer gets their money back, and that GM prospers.”

“…I am not worried about inflation at the moment or anytime soon. It’s certainly true that the Federal Reserve has been creating a lot of money in an attempt to keep interest rates down and to stimulate the economy. But the problem right now is nobody is buying, and I expect that to continue for some time. I don’t think we are going to have an excess of demand over supply, that’s what creates inflation. We should be so lucky as to have little inflation. Right now that’s not the problem.”

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